Calcutta Review Vol. LXI, October December

CALCUTTA REVIEW

An Illustrated Monthly

Established 1844

rHIKO SINUS

I HE

CALCUTTA REVIEW

An Illustrated Monthly
Established 1844

THIRD SERIES

Volume LXI

OCTOBER— DECEMBER
1936

PUBLISHED BY

THE UNIVERSITY OF CALCUTTA

First Series
New Series

Third Series ( Monthly ) ...

mi

1913

1921

THE CALCUTTA REVIEW

Volume LX I ; Numbers I —3
OCTOBER-DECEMBER, 1936

CONTESTS

ft**.

Victor Jacquiiount on Ram Mohan Ray ... ... 1

Sir P. C. Ray.

Responsibility ... ... ... ... 7

Modaroe Ellon Hdrup

Tho Usbagram Schools ... ... ... ... 14

H. C. Mookeijec, w.a., ph.d,

Indian Federation ... ... ... ... 29

Sir A. P. Patro, K.o.l.B.

The Juristic Conception of Dominion Siutua ... ... 38

D. C. Gupta, m.a., n.L., BAR-*r-LAW

The Sociological Co-relatives of Demographic Density ... 53

Benoy Kumar Sarkar

A Plea for Belter Treatment of the Aboriginal Population in

India ... ... — 67

D. N. Majumdar, p.rs., va d.

The Byronic Hero— A Study in Development ... ... 7G

Amiyaknaur Sen, m.a.

Storm, Loss {Poem) — ••• 01

Viola Irene Cooper

The Mortuary Beliefs of the Hindus ... ... ... 93

H. I). Bhattachsryya

Indian States and the Federation ... ... ... 103

Prof. Gurraukh Nibal Singh

The Cinema in Education ... ••• ... 112

Shekb Iftekhar Rasool

The Industrial and Economic Activity of Mation6 ... ... 115

1>. N. Ghosh

Europe To-day ... ... — — 143

Sir Han Singh Gour, m.a., d.lih., d.c.l.. u..u.. bap.-
AT.LAW.

C< -STUMS

iv

Page.

The Character of English Poetry ... ... ... 151

Sri AuFObindo.

The Right to Asylum ... ... ... ... 157

Madame Ellen Horup

The Sociology of Indian Socialism and Feminism ... ... 160

Benoy Kumar Sarkar

Land Mortgage Credit ... ... ... ... 171

J. P. Niyogi, m.a., i-H.D.

Nawab Naztnmddowla and the English ... ... 183

A. P. Das-Gupta, m.a. (cat..), ph.d. (u>sd.)

President of the United StateB ... ... ... 105

Narenh Chandra Roy, m.a., nr.n.

The Position of Electrical Industries in Japan ... ... 212

P. N. Ghosh

Juristic conception of Dominion Status ... ... ... 219

D. C. Gupta. M.A., D.L. BAR.-AT-L.AW.

The Byrooic hero— A Study in Development ... ... 231

Amiyu Kumar Sen. m.a.

How to Organise a Library ? ... ... ... 240

Kban Bahadur K. M. Asadullab, b.a., r.Ui.

Village Schools in relation to Village Needs ... ... 245

J. C. Guba

Nagpur University Convocation Address ... ... 273

Syamaprasad Mookcrjee, m.a , n t.„ run.-AT-t.AW, w.i.c.

The Drama of Silence ... ... ... 283

J r.anendranalh Chaudhuri, M.A,

Ram lloliun Kay — Some facts connected with his early life ... 207
Upendra Nath Ball.

The Religion of Ancient Egypt : a comparative study ... 321

Susil Kumar Maitra, M.A., PH D.

Ethical Action and its Fruit ... ... ... 329

Brij Lai Sharma.

Tbc Juristic Conception of Dominion Status ... ... 339

D. C. Gupta, b l.

The Byronic Hero— A Study in Development ... ... 353

A. K. Sen.

Tn and from South America ... ... ... 361

Kolidas Nag, m.a., d.utt.

Evolution of Modern Civilization and Fuilurc of Revolutions ... 370
Taraknath Das.

At Home And Abroad ... ... ... 117, 219. 373

News And Viows ... .. ... 122,253.379

Miscellany ... ... ... ... 126.257,384

Reviews and Notices of Books ... ... 132. 263, 391

Ourselves ... ... ... ... 137,266,395

C0KTKNT6

v

List of Contributors and then articles

... ‘283

Atadullah, Khan Bahadur. K.M.. BA., F.LA

How to organise a Library ? ... ... ... 240

Aurobindo. Sri

The Character of English Poetry ... ... ... 151

Ball, Upendrauath

Ram Mebau Roy — Some facta connected with his early life. .. ‘297

Bhattachatyyo, H.D.

The Mortuary Belief* of the Hindus ... ... (,3

Chaudhuri. Jnanendranath , .If A.

The Drama of Rilencc ... ... ... ... 283

Cooper, Vida Irene

Storm, Lobs (Poem) ... ... ... ... 91

Das. Tarafoiatk

Evolution of Modern civilization and Failure of Revolution ... 370
Das-Gupta, A. P., M. A.. (Cal.) Ph.D. (Loud.)

Nawab Na/.iiuuddowla, and the English ... ... igj

Ghosh, P. .V.

The Industrial and Economic Activity of Nations ... 115

The position of Electrical Industries in Japan ... ... 212

Gour, Sir Bari Singh, if. A., D.Litt. D.C.L., LL.D., Bor.-at-Law.

Europe to-day ... ... ... ... 143

Oi.hu, J. C.

Village Schools in relation to village weds ... ... 245

Gupta, D. C., M. A.. II. L., Bar. -a!- Law.

The Juristic Conception of Dominion Status ... 38, 219, 339

Horup, .Madame Ellen

Responsibility ... ... ... ... 7

The Right to Asylum ... ... ... ... 157

Muilra, Susil Kumar, M.A., Ph.D.

The Religion of Anciant Egypt: A Comparative 8tudy ... 321
Majutndar, D. N.. M.A.. P.H.S., Ph.D.

A Plea for belter Treatment of the Aboriginal Population

in India ... ... ... ... G7

Mookhtrjee. Syauuiprotad M.A., B.L., Br.r.-ot-Lan.

Nagpur University Convocation Address ... ... 273

Mookerjee. U. C-, M.A., Ph.D.

The L'shagram Schools ... ... ... ... 14

Nag, Kalidas if A., D.Litl.

To and from South America ... ... ... ggj

K'iyogi, J. P-, M A., Ph.D,

Land Mortgage Credit ... •• ... ... 171

Pafro, Sir A. P K C.I.E.

Indian Federation *<• ... ... .,. 29

RijsuoI, SheUh I/lrkhar

The Cinema iu Education ... ... m jin

VI

CONTENTS

Page.

Hay, Sir P. C.

Victor Jacqucmont on Ram Mohan Kay ... ... I

Hoy, Kereskehandra, M.A., Ph.D.

President of ibo United States ... ... ... 196

Sarkar, lit my Kumar

The Sociological co-relations of Demographic Density ... 53

The Sociology of Indian Sociolism and Feminism ... 160

Sen, Amiga Kumar, M.A.

The Byronic Hero— A Study in Development ... 76, 231, 853

Shanna, lirij Lai

Ethical Action and its Fruit ... ... ... 329

Singh, Prof, Gunnukh S'ihul

Indian States and the Federation ... ... ... 108

THE

CALCUTTA REVIEW

OCTOBER. 1937

THE PLAN OF FEDERATION OF INDIA :
GOVERNMENT OF INDIA ACT. 1933

Sir A. P. Patuo, K.C.I.E., Kr.

PtOR inore Ilian a quarter of 3 century, “United India." “United
A Stales of India," “Greater India, ’’ hove been the ideals and
aspirations of patriotic Indioo publicist*. Reports of Royal Commis-
sion* and of individual statesmen conceived greater India in various
models of constitutional change* and vUuali.ei schemes according to
their appreciation of Iudian political conditions. People of Bril iah
India desired full self-government. To attain the Federal ideal W33
found to lie most suitable in the hope of the eventual n-shmilation of
Iudiao States and British-lndia in one National Government under
an all-India Federation. Closer union between British India and
the Indian States is essential for the achievement of Greater India.
The rapid growth and development of liberal political ideas in British
India and ths changes which ore lading pla;e in the politic* of other
countries after the Great W ir, awakened a usw spirit iri this country,
the spirit of nationalism. In the States the enlightened rulers
realised in am increasing measure their responsibilities to India as a
whole. In response to the growing aspirations for full Self-Govern-

2

THE CALCUTTA REVIEW

[OCT.

mens in British India, the Slates most generously conceded shat they
would give opportunities to their own subjects for expression of their
views and sentiments in an organised manner. Representative assem-
blies, though advisory, were established and to executives were delegated
certain po wets . to act on their behalf though not responsible to the
Assembly. Other important constitutional changes were also introduced.
The rulers sympathised with tbo political aspirations of British India
and agreed to help them to realise responsibility in the Central
Government which was made conditional upon an all-India Federation
with the Indian States included This generous gesture assisted the
practical possibility of Indian Federation. The Government of India
Act of 193.* may be said to be the effective eolation of the difficulty of
reconciling responsible self-government in British India with the
sovereignty of State*. As a matter of fact, the ruler of un Indian
State waa supreme in hia sphere. The only control over him was tho
Paramount Power of the Sovereign exeioised through the Governor-
General in Council. This conception of sovereignty of States derives
its support from the terms and the language of several treaties, that
refer to sovereignty of States and the treaties and engagements are said
to be binding also under the Government of India Act of l'~8i> (S. 12p>.
The States arc sovereign not in the sense of * Independent National
Sovereignties,' they acknowledge their allegiance and loyalty Bad to
some extent dependence on the Crown, as Paramount Power. Again
the treaties and engagements, no doubt, furnish an authority but it has
been laid down that they are to be construed in the light of usages
and practices which have growo up by long series of years in the
matter of exercise of paramountry of Power by the Political
Department.

2. India is politically divided between British India and the
Indian States which are about 600 in number. There are 109 States,
the rulers of which have a seat in the Chamber of Princes, but it is
to be noted that all of these or most of these had not taken any
active interest in the Princes Chamber. About 126 other States are
represented by-123 ralera by election. Out of the total tho other 800
Estates are States in the sense they do not form part of British India.
Within their territories the important Statos have all the main
attributes of sovereignty, although their external relations are
controlled by the Paromount Power. In British Indian Provinces,
provincial autonomy has boon iuangarated and the new Governments

PLAN' OF FEDERATION OF INDIA

3

1937]

are working with full responsibility subject to certain limitations.
Parliament ha* no jurisdiction to legislate for the 8tates : they are
subject only to the Paramount Power, which is a vital force. This
problom is now solved by the Act which is made operative in I ho
case of acceding States with their consent.

3. According to the constitutions 1 history of other Federations,
they were formed from contracts and agreements emered into hy a
number of States, each possessed of sovereignty or at least of
autonomy ; and each State agreed to surrender to the Central Organisa-
tion part of tbeir sovereign powers. Their pacts created a specific
group of powers to bo exercised by it on their behalf to the same
extent for each one of them separately and fur the Federation as a
whole. The extent of the surrender of individual slates depended upon
tho urge for such union. Economic necessity, defence against foreign
aggression, commerce and trade were potent indueuces. In India, in
British India, we look in vain lor such States. Britisli India is a
’ Unitary State *; the administrative control was vested in the
Secretary of State and his Council. Section 2 of tho Government of
India Act of 1919 mated, the Secretary of State may superintend,
direct and control all acts, operation!, and concerns which relate to the
Government or Revenues of India, and such powers os the Provincial
Governments exercise were derived by delegation from tho central
authority and were exercised subject to that control. The province®,
therefore, had no sovereign or independent power to surrender to the
Federal organisation. Therefore, the necessity there arose for full
self-government in the provinces before Federation. I said before
that the ladian Slates oocupied a unique position and were under the
sovereignty of the King-Emperor and formed no pan of British India.
Parliament could not legislate directly for their territories. Therefore,
it is only by agreement with the States and with their consent that
the scopes of legislative contact and the exercise of executive authority
could be determined. A federal Union or ihe Unity of Iadi* should
lie based oa organic relations among the Federal Units and the Central
authority, and is diflerem from a mere confederation. The Govern-
ment of India Act aims at such a Federation.

4. The Act provides for the Federation of British Indian
Provinces aod Indian States individually a.-, units. Both in status
and in nature, the Indiau states are wholly different. The paia-
mountcy of the Crown is tho agency which links tho States with tbe

4

THU CALCUTTA RBVIBW

|_OCT.

Now British Indian Provinces. What is (lie nature and scope of the
Paramount Power ? We need not enter into a discussion of the
history of this important problem ; " it is a unique body of law " and
" has no parallel in the constitutional history or law of any country.
This relationship ot law gradually developed and wliaped during the
whole period of British rule in India." The validity of treaties and
engagement* made with the Prince* and the maintenance of their
rights, privileges and dignities have been asserted and observed by the
Paramount Power. But the Paramount Power has hud of necessity
to make decisions and exercise functions beyond the terms of treaties
in order to secure the observance ol treaty obligations and iho
maintenance of peace of India an u whole. Lard Heading in 19-20
stated the posiiiou: " The Sovereignty of tbo British Crown is supreme
in India, uod therefore no ruler of an Indian State can justifiably
claim to negotiate with the British Government on equal footiug. Its
supremacy is not based only upon treaties and engagements, but exists
independently of them and quite apart front its prerogative in matters
relating to foreign powers and policies It is the right uud duty of
British Government while scrupulously respecting all treaties and
engagements with the Indian States to preserve peace and good order
throughout India." It will lie instructive to read S. 285 of the
Government of India Act, 1935, which declares the rights and obliga-
tions of the Crown in its relation with Indian States. " Subject in the
case of a Federated State to the provisions of the Instrument of
Aceossion of that State nothing in this Act affects the rights and
obligations of the Crown in relation 10 any Indian Stale." The
constituent unit of the Federation is the ruler himself, as representing
the State and the Act makes no refernce to the subjects ol ihe State.
For the moment they arc out of focus as the subject relates to an
internal affair with which Federation cannot interfere at present.
Under the Federal uirangementa. the internal administration of a
State is fully exempt from Federal authority and ulso the relation
between the ruler uud the subjects.

Sections 5 uud 6 ol the Government of India Act form the basis
on which Indian Federation rests. They relate to establishment of
Federation and Accession of Indian States. Section 6 states ibot
Federation takes place by the voluntary act of the ruler, a Stair may
accede or may not and the consequences of accession are defined when
accession is accomplished. Both Houses of Parliament shall present

PLAN OF IKUUBvriuN OK INDIA

V.I37]

an address to His Majesty, chat there shall be uuited in a Federation
under the Crown by the name of Federation of India : (a) the
Governor’s provinces. (6) the Indian States >vhich have acceded or
rnay thereafter accede to the Federation. That Section 6 i* important
aud had given rise to some discussion. The State ia to be deemed to
have acceded to Federation if His Majesty has signified hi* acceptance
of an instrument of accession executed l»y the ruler thereof whereby
the ruler for himself, hi* Iieira and successors declares that he accedes
to the Federation. The Instrument of Accession ia of considerable
imporlaircc as it del'mes the *o»p* of federal legislative aud executive
authority in re&epeet of the State. Section 0 <J) declares: The
Instrument of Accession shall specify the matter* which the Ruler
accepts, the subjects provided in tl»e Second Schedule to the Act.
Clauses 2 to 5 provided room for various interpretations but it was
ultimately understood that in the Instrument of Accession exemptions,
reservations and limitations might be made for the benefit of the ruler
Thus ic regard to tbe clauses, in tbe Second Schedule, the Siutes
are sui I to have made many reservations which if taken together might
come to a large number. The State cannot withdraw after it has
entered the Federation aud it is open to the States to preseut supple-
mentary instrument of further extension for the approval of His
Majesty. The States surrender their rights and powers to the Crown
and the Crown acts through the Viceroy of India instead of Govertror-
Gcnoral in Council »3 hitherto aud in all matters not included in the
Instrument of Accession. In the case of the latter, the States have
accepted the enactment passed by Parliament in regard to matters
acceded to by them. RulerB would desire to safeguard the subjects
acceded with limitations and conditions peculiar to each one of them.
Thus new political obligations were created by tbo Government of
India Act in respect of the states. Their Stutus i* now better defined
in relation to paramountcy and the political department. Indian
Legislature secured jurisdiction over acceded subjects in tbe State.

fi. It must bo Doted that the scope of Section 6. Clause 6, the
variation of an Instrument of Accession is only possible to extend the
powers of Federation. In other words, the Act may be deemed to
provide tor extending the federal juiixlietion so that, if things work
well, at some time later this Federation may eventually develop into n
full-fledged National Organisaiion. It may he a gradual process of
development but the path of progress towards tbe goal is definitely

6

THU CALCUTTA REVIEW

[OCT.

indicated. With mutual treat, mutual reaped, common goodwill and
honest service the great ideal which may appear dim at present may
become clearer as we .steadily advance towards the goal. A draft
Instrnment of Accession has been circulated to all States and on their
terms of approval would depend the scope of Indian Federation. The
power to accept an Instrument rests with Hie Majesty. In this
connection Clio place of Federal Court becomes important to interpret
these terras and to explain the relations infer »e of the various
authorities of the Constitution. Toe functions of the Federal Court
are defined as far as possible. But it is expected there might be a
considerable degree of uniformity in the Instrument of Accession, and
it has been eaid that the States would have to make out a convincing
case for any exemption and reservation in regard to any subject
Section 3 of the Act refers to the powers of the Governor-General in
regard to powers and duties as are conferred or imporad on him by the
Act and such other powers of His Majesty, not being powers conceded
with the exercise of functions of the Crown in ita relations with Indian
Stutes, as Ilis Majesty may be pleased to assign to him. The many
clauses of Section 294 define elaborately the extent to which the
present powers of the Crown in the Federated States would continue
to be exercised under the Federation.

7. To sum up, the status and character of Indian States and
the political position of British Indian Province- and the origin of the
Indian Federation were explained The relation between the Indian
States and the Crown was set forth a3 I'orainonntcy is a living
force or power by which His Majesty has contact with tbe States.
The States agreed to surrender some of their political and property
rights to join tho Federation thereby to assist British Indian aspirations
for Central responsibility. The rulers as such represent their States
and there is no reference to their subjects. The Instruments of
Accession would specify the exemption and limitations in regard to
the fortv-eigh; Federal subjects, specified in the Schedule attached to
the Act. It may be noted that State3 also felt that paramountcy has
been gradually oxtending over many spheres and it was loft undefined.
They desired to know definitely tho limits thereof.

8. After having briefly touched upon some of the salient features
of Indian Federation, the scheme indicated in the provisions of tbe
Act may now be looked into within tho limited Bpace available. The
executive authority of the Federation is placed in the Governor-

1937) PLAN OF PEDF.RATION OF INDIA 7

General on behalf of Hi* Majesty : the Executive authority of Federa-
tion extends to matter* with respect to which the Federal Legislature
has power to make laws, to the raising in British India of naval,
uiilitaiy, air force* and to the exercise of such rights, authority and
jurisdiction as arc exercisable by His Majesty in relation to tribal
areas. In regard to Federated States such authority extends only to
matters as to which the Federal legislature has power to make laws.
It is expressly provided that the executive authority of a ruler shall
continue to be exercisable with respect to matters over which Federal
Legislature has power to make laws. The ruler is the Federal
Executive for the State and he thereby makes himself the delegate
for the Governor-General and Federal Legislature. If the administra-
tive machinery of the State is unable to carry on the executive
functions, presumably the Governor-General would step in as
Paramount Power or in most cases under Section 128 of the Act.
The administration of Federal affairs is to be carried on by the
Governor-General who :a assisted by a Council of Ministers not
cxeccdmg ten to aid and advise him except in matters relating to the
discharge of his fuoctions to be exercised at his discretion. Defence,
Ecclesiastical and External affairs a re reserved subjects ; they are to
be administered at hi* discretion , these may be allotted to Councillors
not exceeding three in number. In addition, Ibe Governor-General
has spoil a I responsibilities in regard to which he would oxorcisc his
individual judgment. An Instrument of Instruction defining the
actual manner of the exercise of hia pa wore is issued to the Governor-
General. Unlike the In3trament issued before the Act, the present
document receives sanction of Parliament and is statutorily recognised.
The superintending power of the Secretary of the State i« limited to
the Governor-General's functions involving the exercise of bis discre-
tion or his individual judgment. The appointment of a Financial
Adviser ha* been provided for to assist the Governor-General in the
discharge of his .special responsibility for safeguarding financial
stability Bnd credit of the Federal Government and also to give advice
to the Federal Government on consultation.

9. The Federal Legislature consists of His Majesty’s representa-
tive, the Governor-General, and two Chambers. The Council of
State consists of 158 representatives of British India and not more
than 104 of the Indian Stute* and tho Federal assembly will consist
of 250 representatives of British India and not more than 120 repreaen-

8

THE CALCUTTA REVIEW

[OCT.

Ulivci of Indian StateB The Council of Slate is it permanent body
not subject to dissolution, one-third of the members retire every third
year. Ti* seats allotted to the Council of State would be elected
directly by the electorates formed while the setts for the Assembly
would be elected by an indirect method. The indirect method is an
undesirable change from the present practice. Rule 19 of First
Schedule to the Act propsses subject to the provisions of the next
succeeding paragraph, persons to fill the seats in the Federal assembly
allotted to a Governor's province 43 general seats shall be chosen by
electorates consisting of such 0 / the Members of the Legislative
Assembly of the province at hold therein general seals in accordance
with proportional representation by maim of u single transferable
vote In regaid to the ludiau States, there shall be allotted to each
Stale or as the case may bo group of Stales a certain number in the
case of Council of States. I n the case of Assembly also there shall
be allotted to each Slate a certain omubei of members. It is the
rul-rs of State.- who would appoint these members by nomination to
either chamber It is provided that the Executive authority of every
Federated State -hall be so exercised as not to impede or prejudice
the exercise of tbe Executive authority of the Federation so far as
it is exercisable in ths State. The tiovernor-General (S. 128) has
power to issue such direction to the ruler as he thinks fit.

10. Part VII of the Government of India Act is the real pivot
upon which tac success or failure of Federation and Pioviuciol
Autonomy largely turn, distribution of Revenue between tho Federa-
tion and the Federal units. The allocation of central revenue propose I
in Nxemeyer Report was encouraging but the recent report of Wedg-
wood Committee is very disquieting. However, the Iasi quarterly
return ol earnings of Radwayg raises some hope tint the calculations
of experts may not, after all, be quite well-founded P»fl of Income-
tax earnings are to be distributed to tbe Province- lo strengthen their
unsocial position if the earnings 0 ? Railways aro considered to be
satisfactory and to be able to contribute towards the General fund*
of the Central Government. Finance is a very important subject
which requires separate treatment. Under the provision of Act,
Section 188, a prescribed percentage of the net proceeds in any
financial year of the taxes on income may be assigned to the Provinces.
Corporation tax shall not be levied by the Federation in any Federal
State until ten years have e lap-ad from the establishment of Federa-

1937] PLAS OF F HUE RATION OF INDIA 9

(ion. The States at present are ual liable io contribute directly to
Federal finance other tlmu their indirect contributions in the Miape
of share in the Customs duties, etc. On the other baud any cMh
contribution* payable by the ofutc* tony be remitted iS. 147). Over
3 period not exceeding twenty years, provision is made also in regard
to ceded territories taking into Consideration privileges or immunity
enjoyed by the Stale.

II. The regulation and the construction, maimemnee and
operation of Railways are hereafter to be exercised by a Federal
Railway authority. The oompositi.n of this authority would consist of
as follow* : not lose than threc-°eventlisof the member- of the authority
ahull he person* ap|>oinled by the Governor-General in bis discretion, and
the Governor* General shall, iu li* discretion, ippiioi u member of
authority to be Present. Wide powers are vested in this authority,
its executive power extends to the carrying on hi connection wiib any
Federal Railways of such undertakings as in the opinion of (he
authority it is expedient should b* curried ou in connection there-
with and iu the nuking and carrying iuto effect of arrangements with
other persons for the carrying on by these persons of such undertakings
(S. 161) Powers in regard to Railway services of the Federation
would t>e exerciwd by the authority, subject to the policy of the
Federal Government. Railway Finance would be separated Finance of
Railway authority to i>c dealt with (rein fund known as Railway Fund.
Any surpluses on revenue account of the authority iliall be apportioned
between the Government and the Kiilw.iv Board according to a scheme
to be prepared and from time to time reviewed by the Federal
Government and the sum transferred shall form pari of the revenues
of Federation. It is nut nc.-es-ary to enter iota further details, all
these matters having beeu very ubly considered by tbe Niemeyer
Rep^it. In addition to the Railway authority, the Governor- General
may from time to time appoint a Railway Rim* Committee to give
advice to the authority in connection with any dispute between persons
using or desiring t.i Use a Railway uiiJ the an:. Duty a* <o rates or
traffic facilities which tie my require the authority to refer to Hie
Committee. In addition, a railway Tribunal may lie establish*!
consisting uf a President a id two jtlwr per*jUA to bi s.-lec el la act
in each case being persons with railway adunnUiritivc nr business
experience. The Prrsidcut may b? one of the Judges of th: Federal
Court. The scheme was intended to Ixing the Railway udmiuisiration
2

10

THK CALCUTTA RRV1RW

[OCT.

under the authority so that there may bo co-ordinated development of
communications between the Federal State* and British India as the
financial, construction and odtn initiative aspects of Railways have
become increasingly important

12. Time and agiuu, si oca the publication of tho White paper on
Indian Constitutional Reforms, there had been vehement criticisms of
Indian Constitution and specia attempts were directed against Indian
Federation. Moderate publicists al»j agreed vribb tho contention to
some extent. Federation was described by leaders of one school of
politics as an evil design planned for strengthening the h«dd of
Imperialism in India ; it was fraught with evil consequences, and is
against the progress of Swaraj in India. They argued that it should
be prevented from being brought into operation and that the Act
should be rejected in its entirety. It s, however, very significant that
throughout this long period of criticism and denunciation, not a
semblance of any other constructive scheme was plaoucd in its stead
and no alternative was proposed much lcs* worked out as an
advance over the present which is acknowledged to he unsatisfactory.
The remedy pressed forward was the formation of u Constituent
Assembly of India to frame a Constitution. Such orgauisutiuub wers
possible in the lust ccuturies iu France and in America but their
application to the conditions of India in the present circumstance*
appears to be bewt with many serious practical difficulties This idea
is not looked upon with favour by a craaideruble s*i-ion of the people
of India. Tho Comiuuoul and Minority problems confront tho
advocates however much tliey may try to minimis the insurmouotablo
obstacles. The Communal Award at are* us in the face, and the failure
of ;bo Nehru Report is proof against the p scticabilicy of the proposal.
For the present, the Govern meat of India \ct of 1933 is the mcvilable
solution for the Indian problems and it lias further bccu put into
operation. 41 This is now she Law of tho Lund. '

13. Happily for Indiau progress all the unpleasant and evil
forebodings have been dissipated and liie Provincial Government aod
Legislatures are in full working order. The leaders of the majority
parties in the legislatures proclaim that tbeir object in agreeing to
work the New Constitution U rn mukc the best use of ir. for the benefit
of the masses and for carrying out their policies and programmes.
Tbercforo according to them they work the Constitution and do not
wreck it. Under these circumstance*, wuat u the uexl step ? Conld

FLAN OF FEDERATION OF INDIA

11

1937]

the other part of the Act be ignored and dismissed ? The Government
of India Act as * whole stands as the Law of the hind. It was the
sincere and steadfast work of Indian patriots for the last quarter of
a century to realise the state of United India, the Union of the Indian
States and British India and tbe inauguration of a National State of
India. There bare been frightful difficulties causing despair, and
eventually by the aid and assistance of liberal-minded Princes who
sympathised with the legitimate aspirations of British IndU. the dream
has been realised in however inadequate a form. The Prince# agreed
to sacrifice some of their political rights and privileges and undertook
new obligations with prai.«cw>rthv magnanimity. They entered into
the Indian Federation by Instrument* of Accession. Wo can now
visualise, however hazily, India as a political whole. A great begin-
ning has been made ; it rests upon British India to complete the
process by honest ox>p»ration and by sincere service. All doubts
and uncertainties have been sat at rest by the historic message to
India from His Excellency the Viceroy on 21st June. He said: —
“ I am convinced that the shortest road to that fuller political life
which many of you so greatly desire is to accept this Constitution and
to work it for all it is worth. Of their nature, politics are ever
dynamic and to imagine that their expansion in terms of a writtea
Constitution can render them static would be utterly to disregard tbe
lessons of history and indeed the dictates of Commonsense"; these are
the declarations of an experienced and sincere statesman presiding over
the destinies of India.

14. 1 may. before concluding, refer to an impression prevailing
among a section of the people that the majority party in the Legislative
Assemblies would prevent tho election to the Federal Assembly and
thereby prevent Federation unless the Governor-Generul and tbe
Governors exercise Extraordinary and Special Powers vested in them.
This argument is on a par with the one relating to “wrecking tbe
Constitution " if majority party did not accept office. Tbe govern-
ment of the Provinces was nevertheless carried on. Public men
making such statements should carefully look into the provisions of
the Government of India Ac i. 1035, and Schedule 1. Rule 10, acajrdiog
to which tbe provincial assemblies as such arc not the constituencies
for electing representatives to tbe Federal Assembly but the members
thereof form tho electoral college for general and filial interests.
If the majority of members refuse to vote they are the worse for it

TUH CALCUTTA RBVIBW

12

| OCT.

and the minority would then elect all the representative*. I am
confident that such pyrotechnic would not proceed from thoughtful
iodividmls. It is acknowledged that Indian Federation may give
rise to difficult es, and that it does not fully express the views of
India.

The points alleged inter alia are:—

(а) Disproportionate representation of the States on the basis
of (Mpul it ion. 7il millions and JCU millions.

(б) The Instrument of Accession while accepting the Federal
Subjects would nullify tin s*uis by exemptions and limitations.

(cl Freda nnunue of State infi ieoce ill Legislatures.

(il) Absence of my i npet is for formation of parties on political
principles.

(e) Diuchic form of government is repeated.

(/I Financial relations are far from just or equitable.

<g) The State representatives arc nominees of the rulers.

(/i) There is no si i tutor/ provision for collective responsibility
of Minis tore.

(i) The ruler himsdf i< the Federal Etecntivo Power in the
State for Federation.

(il Abscn jsof ( icilitids hr oo-ordioitod action among the mem-
bers of Units.

All time dilficaltiei ciuld be satisfactorily explained a.s not
unsurinouiitable if the scheme of the Government of Iudia Act . 1935,
is accepted ; these and other* seem to be unavoidable in any
scheme of Federation iti the particular circumstances of India. Tho
Time Spirit is working fast ; and these and other alleged defects may
in time be sit right by mutual understanding and good will.

Nevertheless, as practical workers for the service of the
country and as men of ConiaionseDBe, we should realise that there
is no as; in ploughing the sands for ever whon constructive statesman-
ship and the cause of greater India demand wholehearted devotion and
patriotic service.

TWENTY YEARS AFTER

CALCUTTA UNIVERSITY POVERTY STUDY
Captain J. W. Pktayxi.

'HOWARDS the end of the Great War, when people wue turning
l their (Uteotion to reaonstruction problems, (he tato Justice Sir
Asu tosh MookerjCf took the s ibjoct up with his characteristic
thoroughness. He placed before the Rjyil Commission that was then
studying Indian education problem* a paper on the education system
which had bee a pjt forward as Hit p'»n fir the reconstruction: 1 and
for self-supporting education for Indio; so m after he arranged for
features in the University on the subject and for their publication in
book form ;* finally a special lectureship was established under bis Vice-
Chancellorship, the first for its subject in any University ; its aim in the
word* of a rnemirandatn relating to it. was the study of "the ways of
applying the enormous productive power which progress has given us
to putting an end to unmsrited poverty " (see the Proceedings of the
Kxecutivc Committee of Post-Graduate Studies in Arts, lOtb of March,
111-20, No. 29).

The Gilcutta University publications apj*al for attention to two
gteat needs of our time, to two urgent adjustments that have to he
mad \ in making which, wc should bring about other great changes
automatically, and cause our progress to do us good and our immense
productive power to be used for human welfare, to remove the ugly
features of our civilization. Tho first great adjustment needed is in
connection with our education system, the second, which would follow
from the first, is in connection with housing the industrial population
in garden cities and suburb*, the effects of which would be of the rnoet
far-reaching importance socially, economically and imperially.

Sir Aeu tosh Mookerjee, realising that those questions were of vital
importance to all countries, bad the University publications 6cot to every
part of the world. 3 11 is great fellow countryman, the late Sir Itajcndra-

1 ?«ii< RcMfl of t>« CilantU Uoirrriity CcraniivM, Approdn, Val. VIT, p 18

’ " Mio »"<i MiolifaiB Po»cr i W#r i&t Ktcccntractica '

1 I'irrt '4f»o »cf M«-hio- Pwrer" “n lent cut. • i‘*a “Mf-OorrrnnKBl »nd l»w
Bn*»d PKt»V» “i (In* liller tin lo >io p-Ji* I on « . Over l«vi'J UtOUnni (epieB cf b«k»,
bookl-li md p»<opOltt« wete lwoe -1 in coanirton nilh <b» proptgnDl*. nni «ot oul ».Ui
MOO prinlfd circslsr iMten from the CKivcntty.

14 THU CALCUTTA REVIEW [OCT.

nath Mookerjee who. with tbo late Maharajah of Cossimbuzar, Sir
Daiab Tat.* and Sir Dnshab Waoha, made a princely donation to the
work, aaid that the time might oome wlieu' Sir Asutosh Mookerjee
wo a Id be chiefly remembered fir the bold action he look to call aiten-
lion to those great needs of our time, alike for India uod for Western
countries.

The practical suggestions made in the University publications
received most generous appreciation from every quarter Kin» Edward,
then Prince of Wales, the Prime Minister at the time, Mr. Lloyd
George, a number of Cabinet Ministers among whom the present
Secretary of State, Lord Zetland, and 3 past Under-Secretary of
State, Lord Binha, the founder of the Salvation Army, the late General
William Booth, were among the first to appreciate ths educational idei,
ind the International Social Secretary, Commissioner David Lamb,
icon became an active helper. Many of the foremost economists of
the lime including Professor Gido of Paris. Sir Horace Plunkett, Pro-
fessor Carver of H»rv»rd, wrote of them with Ibc very greatest appre.
ciation. Dr. Leicester, H. M. Inspsotor of Schools, came to Calcutta to
report to the British Board of Education on the plait, and what was
being done in connection with it. In addition to the Sadler
Commission a number of Government committees soon published
appendices about the educational suggestions. The suggestions for
dealing with distribution of population received equally generoas
recognition, conspicuously from Lord Crewe, Mr. Lloyd George and
the Press representing all parties and in many countries.

During the twenty yearn which have passed eincc Calcutta Univer-
sity took its [lion ser action no le.*s than nine Governments have shown
their interest officially in the education system it advocated ; a bill hae
been placed before the United States Seuate for a first step in the
direction of its practical realization, and the British Association has
taken up the subject of country planning ; finally lodia’s Premier State,
on tbo initiat.veof the Rt. Hon'ble Sir Akbar Hydan, stronglysupponed
by the head of the Cooperative Department . Mr. Saycd Eazalullah,
H. C 8 ., is taking the matter up and the Central Piovincee Govern-
ment is considering self-supporting education . so it is high time to give
the matter attention.

1 bif [obliM .|i-»cb at U.i UyiBJ of tl>» fmi*3»<ion U Uv out luildilK
ot M»b»r»i.h O; PdljtmliBlo Imlituteto *b>eH he bad wn'-riburo,! headai.iunly

wbitat Sr !>)'»!< TuU. S.r Din.'.il, Warlij ant a ouiSVr of Calcaltj ’nercbaali occlif-
tiled <0 tba pnipaB«n la.

1937]

CALCUTTA UNIVERSITY POVERTY STUDY

15

It is now dear that those adjustments have to bo made in our
system to save advanced countries from disaster and India from
illiteracy. We have to recognise that, for better or for worse, the age
of machine and all that goes with it, has come upon us, but we
have been made to realise that whatever else may be &3id of it .
it ia killing us by its artificialities besides making people's livelihood
insecure. 1 c offers us, however, a great hope of a better era. First,
the young human bciug, up to the age of about eighteen, ia 44 plastic
and capable of being moulded, and the influences received up to that
age largely determine the whole afterlife " and progress ban given us
the means to bring up the young, during the whole of their plastic
years, in the education colonics in which they would be in dose
contact with nature and formed in healthy and natural tastes both for
work and for sports.

That, then, ia the first great adjustment we have to make and iu
making it we shall be doing, beyond all comparison, the most splendid
thing ever done for juvenile welfare and for sound education and
training.

At the same time, progress has given us every facility and, more
than that, make* every urgent call oq us, to plan our towns and
country in * way that will enable the 41 educational colony "-trained
young pL*op)c to have their * 4 adult colonics/’ in which they will spend
part of their time, uot laboriously cultivating small 44 uneconomic ”
holdings, but producing their own foad by intelligent collective farming
for home use working then only a short shift only in the factory.

Sociologists know that the workers aie at tfccir best in every way.
not when they ure cultivator* pure urn! simple, still le** when they are
only craftsmen, but when they combine some industiial work with the
cultivation, of the soil. Wo therefore see the possibility of the
machine , which so fur scctu* to have brought great curses upoo u*.
giving us a far happier age than we have known yet. The necessity
for the combined occupations under modern conditions has since been
emphasised by the world's greatest industrialist, Mr. Henry Ford.

Sir A*uto?h Mookerjie's great message was that we must not
despair or plan rc%*olutions but adjust things.

All this is equally hopeful for Indio, whoBe great problem i6 chat
of making her soil produce more food for her glowing population. She
must have a “ innil exodus," but a happy one in this case. Over-
pressure on the laud must be relieved by population migrating not to

16 THU CALCUTTA UBVIEW [OCT.

hideous towns, but to well planned " factory colonies " and
garden cities, in which people will cultivate irrigated plots on a system
of scientific co-ordination, producing milk, fruita, vegetables lor their
own abundant supply, workiog oidy a very abort day in a well-
equipped industry. The land will then, to an ever increasing extent,
be cultivated, not by one person, to two uud n half acres which is the
average iu India now, but by few people using good machinery getting
thu utmost possible from the soil, making every field aud every part of
the country, produce what it is best suited to produce by the best
methods Thus it will yield abundant food for the people which it
cannot do under present conditions of cultivation.

With the labour-simplifying methods progress ba-s given us, the
perplexing problem of disposal of products cau bo solved. People can
prodace things for one another, simply ou the system of the village o|
ancient times, but organised by a vast country-wide co-operative ex-
change organization. The great signal we have now for this modern
return to the ancient, ia Senator Sheppard's bill <the United Commu-
nities' Bill), aud tbe brilliant success of tbo Swiss pioneers of Witzwil.
Both those pioneers read the Calcutta University publications with rbo
greatest appreciation ; the splendid example of a production for uso
organization giveu by the Swiss and the need to follow up its success
is a great theme of its publications. Production for ure, they explain
clearly, must not supersede trade. All the industries could be private
undertakings selling what tliey were able to sell. With modern faci-
lities, however, we could have the old-tune system m its modern —
" United Communities "-form exchanging what they could not sell,
for tbe use of the pioducecs. Industries would then not depend on
aka, or worker* on money wages. Both would work for the exchange
tokens of the co-opsrative org.miz.uton. Willi these they would he
able to purchase not only the organization h good* but at y thing they
wished, for p topic would accept the token* as readily as money. Ob.
vioua precaution* oould prevent the toketu actually becoming * currency
and causing inflation.

AUo on the simple old-iitno plan, but earned out ou a country-
wide instead of villige scale, people would be able to pay their reut
and taxes in kind. They would pay taxes in their exchange tokens.
With them the Ojveruiueut would be able to pay ish officials part
of their salaries, and purchase its various requirement*, the firms pul-
ing them on, in proper proportion, to their worker*. Government*

1937] CALCUTTA UNIVERSITY POVERT Y STUDY 17

would al#> purchase bills of exchange with them for article* to be
imported.

Problems of over* population anti unemployment will arise until
organization and distribution arc perfected, but young people brought
up in educational colonies having learned to work together co-opera-
tively, would go out to new countries, and to undeveloped parts of
them, as pioneers, from sheer love of adventure. They would establish
their colonies there, uud so a*k no one for employment. They would
ask only for co-operation with established settlers in way# that would
be mutually of the greatest possible advantage. Financiers would
readily capitalise the well-trained young people.

Thus the education planning will lead us to the Empire planning
we need that will benefit all classes.

Those were the suggestion* put forward in tho publications of
Calcutta University, endorsed by great economists, written about in the
Press from Calculi a to San Francisai, noticed in seven full-column
articles in the London “ Time* " in its Educational Supplement.'
Mow what is tbere to bo ssidof it all twenty years after ? Was i; a
flash in the pan ?

Sir Asutosh Mookerjee had set himself to carry out ihe educa-
tional idea when death Struck him down. Ho had taken the lead in
connection with an organization that had been registered in Bengal
under the name of the Modern Co-operative Agricultural Association,
Ltd. His death was tho first disaster that befell the effort to lead
India’s patriotic movement in the direction of this constructive work.
The second disaster was the equally sudden death of the late Lord
Siuha, who, with Sir Manmalhanath Mookerjee — reoent acting Chief
Justice of Bengal — and others, had stepped into the gap.

But the educational colony is the need of our modem age, so the
idea was bouud to live, and it is becoming clear now that the industrial
countries, will have to adopt it speedily.

Statistics of “ appalling 1 ' physical deterioration and fore shadowing
'■ precipitate ’’ depopulation, are the grim indications we have now
of the effects of ever increasing artificiality. They are the indications
of life and work under condition# that are joylesa, under which un-
healthy excitement# take the place of natural zc&t of work and joy of

1 SmISI IB* in II, iH-0, 6 tod 13 V, 192 , 2 IX. 1023. rtl.ndiCX. 1323;
uoeej oilier (rwit-oai («Uirotion>, " Nilur* " »tw> giro > long icria <1 noiKu urn!
Prolreem, Gilts, Cetrer •o i Bklsjrd *tol» in nun/ piperi ic ralise approval.

3

18

TUB CALCUTTA TiBVlKW

[OOT.

living, which is found even among decently treated slaves. The facts
now confronting us are those of death supervening on the joylcssuess
of industrialism without the necessary adjustments in our social
system. Palliative measures will be applied id Western countries to
minimise the symptoms, and with various degrees of success, but Sir
Asutosh Mookerjee took his " action perhaps without a parallel in the
annals of any learned body, ' ’ to cull atientiou to the fact that we can
go to the root of the matior, and restore to |K*>ple healthy aud happy
conditions of life, and work, and that is what we must do.

There is no more elementary truth than that every creature must
have suitablo fc*>d and proper joyful exercise. Failing either ol the
two things deterioration and infertility follow. With the humam being,
work exercising the miud aud demanding dexterity may bo good, if
some bodily exerriM also is taken, but we know now that, more and
more, our industrial system is failing to give what is essential. The
human being under degenerating conditions hastens the process of
extinction by artificialities. Unhealthy tastes and liabits are accelerat-
ing deterioiaiion, aud birth-control is accelerating racial extinction.

Man with reason and conscience cannot let this go on with the
cause and the remedy both obvious. The appeal of every oammitfee.
aud every person, who has exumined the facts, the giant efforts of Sir
Asutosh Mookerjee, the efforts iu America that inspired Senator
Sheppard to place his bill before the United States Senate, cannot long
remain vain. The young will be brought up in educational " United
Communities ” — to use the American word— so that they will not work
in industries more than a short day. at least till experience or skill fits
them for work that ia really good. Then also we shall have, a great
“ United Communities ” system, that will give people “access to
machinery of production ” and the machine that is now a threat to
man will bo a useful servant instead.

The educational oolomes plau could he carried out in many ways
but tho ways suggested in the Calcutta University publications fur
towns and rural districts will be given as an illustration.

The children and adolescents would divide their day pret ty equally
betwoen productive work, the beat games and sports, and lessons.
There would ba more of tb6 productive work in the case of poor

' Bee tbs Editor'* iotrodaclko to th- booklet Inorf by " C»pit»J." C.lrtlli, on tbt
Ucivtnitx prc£»sg&ndft.

1937] CALCUTTA UNIVERSITY POVERTY STUDY

19

children, nnd more study in that of those destined for professions. It
woald ba employment and school g>ing on together, and the first qoe*-
tioa is what its economics would be. bow it would affect poor parents
aud the State.

We shall consider it first from the point of view of the nations
and sections of the population shat are perishing under present condi-
lions. Its application Co the Indian rural districts is absolutely
simple.

First and foremost it has to be understood th\i the " educational
colonics " plan has been made practically po^ible by tbo fact that,
in a modern organization, well trained adolescents may be as good as
adults in many branches of product ivo wjrk. and ro^lero labour-saving
methods can enable them to produoe useful com modi tie* for their use
by very little labour, leaving time for studies and sports.

Children and adolescents would have to be fed in the educational
colonies and on a more liberal scale than is usual among the poor.
But systematically growing fruits and vegetables, scientifically preserv-
ing products for all-year supply, t be colonies would easily provide a
d ; et that would be keenly relished. Foodstuffs that had to be bought
would be acquired on the largest scale, for the immense organization,
and it would no doubt gain further advantages by co-operating for ita
purchases with other public services. Under those conditions difficul-
ties would be reduced to the minimum.

In countries in which parents maintain their children during the
school age, that is to say, up to about fifteen, the parents would not
have to pay more than a part of what it would cost to feed their
children less well at home, so chat in no case ooold there be just com-
plaints. Within reasonable limits parents might be permitted to
supplement the diet provided by tbo colony. There are numerous
ways in which parents could be tnaJe to pay their share.

The children and adolescents would cultivate small allotments in
proper co-ordination, in little partnerships of seniors and juniors. The
cultivation could include even produciug fodder crops to feed goats for
milk, and poultry and rabbits. Cultivation that would not be profit,
able commercially may be quite profitable under the conditions of
production for use. It has to be remembered that in producing for
use, people earn, or rather save for their benefit, the middleman's
profit, and all the transport and marketing charges, no that work done
producing for oneself iu a good organization is very well rewarded, and

THE CALCUTTA BEVIBW

• 21 )

[oct.

the economic conditions are entirely different from those of production
for sale. That must be specially noted as the fundamental economic
principle of the plan.

In Western countries a most important function of this labour
army of the adolescents, helped to some extent by the elder children,
would be to assist the farmers. They would go to work in farms
specially at the times when extra labour is needed, working not for
money but for payment in produce for their organisation. Extra
labour at certain times, well trained and dependable, is the most valuable
assistance agriculture can have, enabling better cultivation to be earned
out and valuable crops to be safely harvested. The plan is of great
value in that way also. The payments in kind for dependable help
could be on a liberal scale. Finally some of the adolescents and older
children would take turns of work in colonies near factories, helping
in the production of clothes, and many commodities of ordinary use,
including even school requisite*. They would work a *hort shift in the
factory, four hours at the most. For their labour the educational
organization would take products it wanted from the factories, to
distribute among the young workers according to their various require-
ment*. On a similar economic principle the earnings in kind would
be at a very high rate.

So far from there being any economic difficulty to foresee, it
seems hardly conceivable that three hours' productive work daily
should fail to make the children and adolescents, taken together,
entirely self-supporting. There is no need, however, to dwell on
that possibility as regards Western countries but it makes it clear that
we must try the plan ami not waste time couriering eventualities that
may never arise. The possibilities of self-support, however, arc of
great hopefulness for India and are specially atre39ed in tho Calcutta
University publications— that it is the solution of the problem of self-
supporting education for India.

Then, again, those publications dwell on the possibility of private
enterprise co-opeiatiog cordially with the educational organization, and
allowing adults m well as tho young to work for remuneration in the
credit which the great co operative organization would similarly tuke
from them. The stage might soon be reached at which the exchange
token3 would be readily received for all kinds of payment. The
American "United Comm unities ,f bill is specially for adults.

Leaving, however, these possibilities, which were not generally

1937 J CALCUTTA UNIVERSITY POVERTY STUDY 2J

understood, ami concent rat tag oa the 41 educational colonies ,# plan
which has attracted much attention, we have u> cousider the poaBibi-
lily of private enterprise not co-operating cordially at fust. In that
case the education'll orgoniz-ation would make special arrangements
with a few industries, if necessary financing them. These would be
given an assured custom from the public und from the parents.

Ab regards poor parent*, for European countries, it is self-sufficient
to say that cases of genuine poverty could be met. Childreu o: parents
in poverty could contract lo remain longer in this juvenile labour army,
and then make useful contributions in kind to tbeir homes from an
early age The * 4 educational colony ” system would be the very best
belp to the poor. Earnings in kind, once more, ure on 3 liberal scale.

One has not to anticipate difficulties in connection with
Caking town children to educational colonies." One of the im-
portant features of the system would be that it would keep town
children for a considerable part of their time in the colonies,
sending them home perhaps twico a week id the case of quite
young ones, and once a week m case of older ones ; at the most,
young children would go Lome alternate nights. Another important
feature would be that the seniors would, in a systematic and
organised way, take care of the junior*. Tbe plan would be to
train and develop the young in every way, among wbicb i>ot least, In
working together organized, in service — scouting in a word, for which
i; would give magnificent scope. The Scout movement ha3 shown us
that the right spirit can be awakened in the young, and that alone,
is true education , as every real educationist knows; with the spirit,
every kind of development is stimulated and perfected. An important
part of the plan would be tbe organisation of town children's
travelling tbe juniors in little groups with seniors. In these days of
motors and tractors it would be easy to design types of trailers for
very slow travelling over the very abort distances, which would
generally bo only from two to three miles, with children living tbe
furthest away. But evidently, as there is no better exercise than
Stuart marching, with spurts ol running, the children would assemble
in little 41 Scout " groups under a senior, aod the groups would march
together along chosen routes, with masteia on bicycles supervising.
The conveyances running along those routes, would only have to
pick up successive little groups, to give young children living at the
greatest distances, a lift for part of tbe way. As regards young

1HF. CALCUTTA RUV1EW

22

[OCT.

children living in the centre portions of very big towns, those are
the very ones it would be desirablo to keep in the educational colonies
a.i rnuob ns possible. Moreover, big towns have their trains and
other conveyances that, in the mornings ooiue empty from the centre,
bringing in successive lots of workers and that oonveraely. in the
evenings, run empty to the centre, bringing successive lota of workers
out. These conveyances could bo utilised in their returning empty
journeys, tc take organised groups of children »mc of tho W3y to
their colonies.

It is sufficient to say that there are many plan* to be considered
from many points of view for a well organised labour anny of the
young, aiming at training thorn in the full «on*e and the organization
and discipline of the labour army, the system of the responsibility
of the seniors for the juniors, would be the best training and influence
to seniors and juniors.

Of greatest importance of all, the C&loatta University publication
insist " educational colonies “ promise to be in every way the best
thing ever done for human welfare. They would create for the
young a very paradise. Variety of good occupations with good
opportunities for sports, woald make their young lives happy. At
the same time, as all educationists know, keeping the young working
with enthusiasm by such variety, means, in a word, doing everything
for them that is best in every really important way. Nothing else
educationally is more than dust in the balance in comparison with
the importance of kaepiug the young enthusiastically husy. Cultural
education would also gain enormously. Spreading it out over a longer
period, going on side by side with real employment, would be
altogether advantageous to it.

Then tiic organization we should bavo for the young would ha an
example of the way in which we could organize generally to “ use
the productive powor progress has given us " for human welfare,
using it to purge our civilization of all depressing features.

In rural India the educational colonies system would be a system,
as one might explain it illustratively, oj equipping some villages well,
to make the labour oj the equipped people produce a surplus, and
living some oj the surplus to puy schoolmasters and doctors for tho
surrounding villages a salary in kind. The industries in the
" equipped villages " could be private undertakings, but those
capitalising them would make certain conditions for their social

1937 1

CALCUTTA USIVKRSITVr TOVliKTT STUDY’

23

utilisation, which the University publications show would be sound
from every business point of view. They commend the plan very
specially for consideration as hopeful for India’s industrial develop-
ment, to give a 6 tart to an industrial system suitable 10 India, and
to be the nucleus for the co-operative organization, supplying necessaries
for payment io kiud, which would first make India’s great man
power the factor in hot development.' This would lead to the
redistribution of population in the rural districts that would give the
masses sufficient f *>J and the benefits progress has to offer wnh the
hope of avoiding the evils that have accompanied il hitherto.

But finally the question is how the ceceBsaiy country planning
is to be carried out ; how “ educational colony "-trained young people
are to have the " factory colonies " and the kind of towus they will
waut without colossal profiteering in rents neutralising the good of
them.

As that might seem to many to be the great difficulty it is well
that wc are able to sty that of the suggestions contained in iho
Calcutta University publications none had more distinguished notice
and approval than that which related to this matter . 0

Th« problem appeals moal difficult in the case of European
countries, so we shall con aider them first, and the solution for India
will follow obviously.

Any plan for better distnbuiion of population, and to enable
people to combine the cultivation of the land with iudusirial work,
would place some land-owners in a position to demand enormous rents,
whilst other landlords would sutler ruinous losses. ^ The first tiling
needed therefore in connection with country planning is io value the
land and thon take in a “ betterment tax ” the whole of the increased
value due to planning and coiupen-atc those who would lose. Iu that
way we could have once uud for all an equitable fixing of rents.
Planning in a word would transfer values to new places and enorm-
ously increase them on the whole. The measure needed for it is one
that, after a fair valuation, allowing every owner the present value

I 'Ibithi. aln.Won tons »oi fe<»-ntlj ■•Iro’nrafby Sir Dome! H.nitlui.

1 Tli« " fUvur InuriutiaiUe Emd.ii -(iir “ |iaV.noed > litfbly .pprwutiwr Dctice M
it bv ikeoIxUriUl FreBcti cviwnitt. lb - l» * k’ro'e.ror Cbirl.ii Hi* ■. tl« "Z*::lr»;e a
3appl«ro.nt " of Ibe "Berlin TaW»iUiW ’’ p-blbfced on* by Dr. Uu.lltr.voH.iio.Di
.sere . tcol« ia tie * Duly Non. ” rofomo:; Io il neOiolly, ond (uinorubln ruioiueuto
iu p.poio reurtuSa'.iDjr oil sbudw ut opinion in many cojuiiirt.

i Sou “Mon ood Uuciiioe I'.-.r " iCo'eul'n Uai>er»ity!, pp. 130 onword., tlw U*
Ixok. iu.ulx.ued in tie («vtnol« llw end

•21

TOE CALCUTTA REVIEW

[OCT.

uf iiis land would fix rents to prevent any profiteering. Then the
values taken by the “ betterment tax ” would pay the interest on
Government stock issued in compensation to the owners of tho sites
the planning sacrificed and every kind of rent profiteering would be
stopped.

Under modern condition! such a measure would very soon gtvj
ua towns in which the workers would be able to combine cultivation
with industrial worfe. and malm a change that would be of incalculable
value for healthiness, prosperity and safety in war.

What we have to consider in this connection is that the conditions
that demanded compactly planned towns are all of past times, and
tin: every consideration now demands that towns should throw out
iineal suburbs for their population to live in, along the good lines of
communication, the centres remaining only places of business, pleasure,
aud perhaps of dwellings of the rich. In lineal suburbs tho workers
would be able to have land.

The next thing to be understood is that it would be. not ooetly,
but exceedingly paying to mike this transfer of population to suburbs
if only the necessary adjustment in our land system had been mado . 1

The site values sacrificed iu the towns again would not be des-
troyed but transferred to the suburbs, uud taken in tho "betterment
tax." The new houses wiuld b- built as a commercial enterprise.
The Ioja, the cast, would be the abandoned houses in the towns. To
a small extent, however, their value would be transferred also.
Demolishing old homes wholesale to rebuild wholesale elsewhere, the
machinery would be constructed to demolish economically and in Buch
a way as to mike tho greatest use of tho materials for tho new build-
ings. It should be miotioued that in lineal gurden cities where
manure would have great value, sewage system* would be adopted
that though they are more costly to operate are comparatively
cheap to establish, and would he best because the manure would have
value.

Against the cons there would be gains of colossal dimensions.
They caoDot be estimated exactly, and need not be. because it is clear
that they would make rebuilding the towns extremely paying even
from the most cut-and-dried ratepayer’s point of view.

First, planning towns in tbai way would turn many millions of
acres rural land into gardens, valuable " accommodation land ” of

1 S«* •* X'vn md Mwliize Pos.r,” p. MO«a*ordi.

1937) CALCUTTA UNIVERSITY POVERTY STUDY 20

different kinds, and mako much of it more valuable as iaial land. These
increases duo 10 planning would also be taken in the •' betterment
tax " and it lias boon calculated that they alone might pay for costs
without hardship on any landowner. 1

Apart from that, if we rooaider merely the cost to tbc rate-
payer of crime, sickness and pauperisation which is well over fifty
million pounds a year in Grout Britain and if wc consider tbo
statistic' that show how all of them are diminished when population
is housed under garden-city conditions, we sea that savings under that
heading alone might cover all the cords by themselves. This is rendered
more probable by the fact that garden cities combine the condition'
that tend to diminish alcoholism, whilst crowded towns combine all
those that aggravate it, and alndiolism i* the greatest cause of
disease and crime. Thou, apart again from that, there would be no
costly unemployment problem with lineal gardou suburb', with which
thoro would certainly he some kind of “ education colonics " system,
with its economic organisation.

Taking tho various item* together and many others of great
importance, it is clear that industrialized countries, with their costly
social services, could without even the appearance of sacrifice, re-liouse
their workers in lineal suburb- as quickly as they chose to, and with
the absolute certainty that they would be doing the wisest possible
thing even from the narrowest fiscal point of view. Tho military
value of establishing conditions that would diminish enormously
the dangers bath of air bombardment and starvation during war would
bo unother incalculable factor, whilst socially the face of our
civilization would be changed.

It is of gteatesl interest and importance that Great Britain, by-
spending about two hundred million pounds on re-housing a portion of
her workers in lineal suburbs, which would be places of refuge in
temporary shelters in war for another great portion o( them, making
tho corresponding clearances iu the town3 systematically, to localise
fires, and using the dobri> to make bomb-proof shelters, could reduce
the danger from air bombardment to a small fraction of what it is now,
and with the certainty that the money would be rvell invested finan-
cially, as well as socially with infinite benefit.

1 "* Maii aoi Mi*- li.ee Pairer/* W«» uni t lie a Ik* lc*V- nui*t*o«il in ll»r ft tA

Kte u\ tte fxvl

4

26

THE CALCUTTA BHVIBW

[OCT.

Boldly the late Sir Asutosh Mooberjee issued the appeal to
educated people throughout the world to study these facts. In his
own words " I bad a series of lectures on the subject printed and
sent to the professors of economics of every University in the Empire
and many foreign ones and the result wan entirely satisfactory :
there were only favourable comments."

Now twenty years after the great appeal “ Save the children and
they will save us,” the challenge remains unanswered." *

1 ?*• '• Up*mpk>VttdOk,"' CVcutU V*\rero\ty.

* »!*> ih© took »b il !©«l S r A«uto*h Moo lerjee to tile* ihi* Mtura— M Tim Cuming

Triumph <J Cbri-tMa CMUiiun *' lAlUo * Ur.wiu’i K Tb* cifthtoeft-IMgft p’™** c»f 14 io lb©
** HW4/I /Ouroftt/' i*n. IM8, uo fc* “ Arm tb* Br»io© B©bioi the Labour K*io!t Wrong ••
»L* io «atir* tgrttsntat from b*i:i:»ni»c Tbc face. -oW. ©re uoruairov«*M%&lc

mad lb;© wm eobxwl io c*itK&<viia: review i io all rcuctrirs

RESERVE FUNDS OF CO-OPERATIVE
CENTRAL BANKS

J. r. NlYOlil, M.A., i'H.D.
pfoftiut fcw.mx*, CVrnMu CimcuJy

I N tbe lay roiod there is a tendency to confuse a Reserve with a
■ Reserve Fund. Their functions, however, are quite distinct.

The problem of Reserve i6 the same a* that of 0uid resources. A
Reserve may or may not be built out of profits, while a Reserve Fund
is always built out of the surplus of a*wt* over liabilities, livon after
the lapse of more than three de.-a.les of the working of co-o|ierativo
credit societies, there exists to-day 3eute differences of opinion regard-
ing the nature and function* of a Reserve Fund. Is it permissible to
use this fund for providing fluid resource ? Gan this fund be utilised
for writing off bad debit, ? Is it open to a Central Bank to use its
Reserve Fund for meeting demands of creditors ? These are some of
tbe quest ions winch have been asked.

Rules framed under the Indian Co operative Societies Act lay
down that in all co-operative societies of which tho liability is limited
by shares, not less than ono-fourtb of the net profits shall bo annually
carried to a reserve fund ‘ In addition to this minimum sundry other
items aro also credited to this fund. Admission fees after deduction of
the preliminary expenses incurred in constituting a Society, the value
of all forfeiied shares, lapsed dividends aad fine9 also go to the Reserve
Fund.*

Let us dow ask ourselves the fundamental question— What arc the
useB to which this Reserve Fund can be put ? Speaking generally two
alternatives at odco euggeet themselves. Tho profits of a Central Bank
which are set apart may bo used by a bank cither in ita own business,
or they may be separately invested. In so far as tho first alternative
is adopted, a bank may use the profits for providing the necessary
liquid assets against tho demands of its depositors. In auch a case the
profits cease to bo a Rcstrte Fund but become what ia technically

1 RuIm ur^cr 9c:. tS cl the Co-opciid\o Sotielio Act. 1912.
* Bj-Lvt* 72 ti C«0U«1 Co-(faittiw B.nk toned lypei.

THE CALCUTTA HE VIEW

28

[ocr.

known in banking parlance as Be Berra. I; is true that this wwrvo or
fluid resource is generally provided ouc of share capital or deposits.
But there is nothiog to prevent the use by a hank of a portion of its
surplus assets in this manner, particularly il the share capital and
deposits are insufficient to provide the necessary liquid cover.

It is al*o open to a Central Bank to use its profits in its own
business to supplement the working capital obtained from other sources
c.f/., share*, loans and deposits. If fcho assets arc thus utilised they,
cease to be a Reserve Fund and become a Reserve Account. One of
the principal arguments advanced in favooi of this policy is that from
the financial point of view the bank is likely to be a gainer. The rate
of iutcrest which it is likely to earn by lending out iis profits to the
constituent societies is generally much higher than that which it is
likely to obudn by inventing the Reserve Fund, say. in Government
securities or even in the Provincial Co-operative Bank. One of the
objects which the Mac lagan Committee on co operation had in view
was the increase of “owned' 1 capital. That end can be achieved more
effectively and quickly if the profits are used as working capital than if
they .ire separately invested. The Committee therefore recommended 1
that subject to provision being made for the maintenance of fluid
resource, primary societies and Central Bitiks should use their reserve
funds in their own business*. The matter was also debated at length
in 1918 at a Conference of Registau* of o-operutivo societies. This
Conference pissed the following resolution 2 :—

M That while recognising tho ultimate advantages of moating a
separato reserve fund invested outride the movement, tho Conference
consider that at the present atage of development, it may in many
cases be desirable to prefer to this object the creation of capital owned
by co-operative institution* fox utilization in their business. Subject to
provision being made for the maintenance of a hate standard of cash
reserve or fluid resources, they consider that there is no objcctiou to
the employment of the surplus asset* or undistributed protits of co-
operative institutions in their own business."

Apart from using the undistributed profit* iu their own business
Central Bank? may set apart such profits and invest them m gilt-edged
securities to constitute tho nucleus ol a fuud which will grow us tho

i R«coniB^tMc« X<*. 86 md 131.

7 R*w lotion Xo. U— Report of tU Kifl'jib Cccfcreare of Rrgiictar*. lOlfl.p. M.

1937 J RRSIiBVfc FUNDS OK CO-OfKltATIVR C KM UAL HANKS '29

volume of business increase?. The object of this fund is to provide for
90ine possible or estimated loss on the rcalinvtion of certain assets or in
respect of pending assets. 1 It is only when profits ure thus invested
that they constitute a Reserve Fuod strictly so called. It is this view
which usually appeals to the layman who deposits his money with
Ccotial Banks. The min in the street views with great suspicion the
use of reserve fund a.' working capital. It is no use telling him that
" owned capital " should be increased or that fluid resources are neces-
sary A reserve fund according to him is au mviolable fund built out
of profits, invested oaf side the inure went to be used ODly in times of
grave emergeucy.

In the light of these considerations let us now proceed to enquire
into the manner in which the Reserve Funds of Central Banks in
Bengal have heeu actually utilised. The by-laws framed by the
Department lay down with sufficient clearness the various rises of this
fund. Id the first place tho fund may be used to cover any loss arising
from unforeseen rncumstances and to meet any call on the bank which
cannot be mot otherwise. In the second place the RoscrvoFund serves
a* a security for any loan.-, which the hank may have to contract. If
the funds are drawn upon to most unforeseen losses tho rules contem-
plate that sums thus drawn upon should bo reimbursed from the
next accruing profits. It will appear from them- rules that the framers
had clearly in view an inviolable lund which should be utilised only iu
exceptional circumstances.

rhe Co-operative Societies Act, 1912, permits a registered society
to invest all its funds including tho Reserve Fund iu gilt-edged securities
or in other securities approved by the Registrar. The departmental
rules framed by the Registrar iu Beugal require that all Central Banks,
as soon as their reserve funds reach Rs. 230, should deposit such
funds m the Provincial Co-operative Bank iu preference to securities
specifically mentioned in the Act. Societies of long standing which have
proved their credit arc, however, permitted to use their Reserve Fund
as working capital.

Reserve funds deposited with tho Provincial Bank may be with-
drawn at any lime with the permission of the Registrar. It is pointed
out in the circular issued by the Department that the concentration
of the Rcrervo Fund in the Provincial Bank is likely to strengthen the

Li" ill Piieciplcs ol Cc-opsru.ua IllliO), p. 219.

30

THR CALCUTTA REVIEW

[ocr.

movement as it will facilitate the mobilisation of tuch reaources. It
will have the further advantage that the reserve fund will be invested
in a readily realisable form. As the circular points out " Too much
stress... cannot belaid on the need for an adequate cash rcecrvo for
every co-operative hank, as without such a reserve their financial
position will always be open to criticism by businessmen."

The conception of a He serve Fund as embodied here is somewhat
different from i hat envisaged in tire by-laws. The main function
emphasised in the Registrar's circular is that of providing liquid cover
against deposits. The idea of a Reserve Fund, inviolable and indivi-
sible, set apart for the specific purpose of meeting unforeseen losses
recedes into the background, while the necessity of liquid reserve as a
means of popularising Central Bank* is given a prominent place.

It is, however, strange to find that notwithstanding circulars and
instructions, in a large number of cases the Reserve Fund has actually
been used as working capital. I: was only with the advent of the
depression of 1920 that attention was drawn to the risk involved
in such a practice and the necessity of separating the Reserve Fund
from working capital was realised. 1 Thus we liavo the by-laws
contemplating the establishment of a separate inviolable Reserve Fund,
the departmental circular emphasising the need for a Reserve as a
means of securing liquid assets, while the banks themselves usiog the
undistributed profits a» a Reserve Account.

Tbi* anomaly should be done away with. It is essential that the
Reserve Funds of Central Banks should be taken out of working capital
and invested separately outside the movement. While it is desirable
that the owned capital should increase, it is of greater importunes to
secure the ooufidonce of the public. Safety should in no circumstance
be sacrificed for the sake of profit, flocked at from this point of view
it may be seriously questioned whether the present policy of deposit-
ing the whole of the Reserve Fund of Central Banks in the
Provincial (ki-operative Bank is a sound one.

The Provincial Bank uses this deposit as a part of its working
capital. And it makes no difference to the co-operative movement as
a whole whether these undistributed profits are used directly by Central
Banks as working capital or indirectly vid the channel of Provincial
Bank. Any danger which threatens tbo Provincial Bunk is likely to

1 B.foit on the Wodriog of Co-eprttl** Scodiw, Boogri. IMl-W.

1937) BRSERVB FENDS OF CO-OPERATIVE CENTRAL BANKS 31

involve the Central Banks also in one common ruin. That this risk
is not a fanciful one will appear fiom the digester that overtook tho
Burma Provincial Co-operative Bank. 1 It may also be recalled in
this connection that when the C. P. Provincial Co-operativo Bank came
to grief in 1920 the whole co-operative structure was on tho point of
collapse. Due mainly to over-flnaociug of Cential Banks and primary
societies, the Provincial Bank was living a hand-to-mouth oxistence
during the first half of the year 1930. In September, 1920, the Provin-
cial Bank refused to allow further drawiogs by certain Central Banks *
upon cash credits granted to them not only for the finance of primary
societies but even ns a fluid resource or cover for deposits. When tho
task of reconstruction was taken in hand one of the resolutions passed
by the representatives of Provincial and Central Banks was that the
Reserve Fund should be deposited with the Government. Even :n our
own province it must be remembered shat the Government of Bengal
had to come to the rescue of the Provincial Bank in 1936.

If it is not possible to invest the whole of the Reserve fund out-
side the movement , at least a portion, say 60 p. c. should be invested
in gilt-edged securities. Tiie Committee on Co-operation in Burma
presided over by Mr. Culvert suggested that tl>o whole of the Reserve
Fund should ho invested in Cljvcromont Securities. 5 The Bihar and
Orissa Committee on Co-operation was more generous to the Central
Bunks, The Coiimittce reoomniendcd that of the Reservo Fund
should be utilised ?s working capital by Central Banks. But even thin
Committee recognised the necessity 4 of investing n portion of the
profits outaide the movement in gilt-edged securities, first class deben-
tures, or fixod dopoeits in uo approved bank uuoonoected with the
co-operulive movement. The Town-end Committee on Co-operation,
Madras, unanimously recommended that Central Banks should be
encomuged W iuvest their Reserve Funds in redeemable Government
securities. 1 The practice prevailing in Bengal abould, therefore, bo
modified in tho light of IUc9e reromaicndntrons.

' Oalnrt Committee oo Co operation . (),->. 73 TC.

• King Committee on Co-operatim, C P., 1923. p. «.

3 Commit ! m oo C.i-opifitiia.lliinni. pp 1861.

• Commute* 00 Ca.opont^o, Bilur an.l Orli.u, p I fi.

• Cou.miUto on Oo<smii.i., Kt«,li .n. 19S7-3S, p. 91.

MANAGING AGENTS IN THE ROLE OF
THE INDUSTRIAL FINANCIER.

&noJK<nMn Basil, M.A., I’n.D.

LtfUti ’ fu ffiUHOuiMf «iil Cmmtrrt. U*iirriity of Cattvil*

P.iirr II

DEPICTS OP THE MaSAOIKO AGRKCV SVSTBII OP FINANCE— IKTER-
INVESTMENT OP Mill. PONDS

A LTHOUGH tlie managing agency system has rendered a very
useful service lo Indian industry* by furnishing the necessary
finance- directly or indirectly, '.he system of financing by managing agents
has been open to grave defects. In many cases they have pursued
such unsound and questionable methods in financing industries under
their control thuc the whole system of financin’ by managing agents
has come to be regai ded as unreliable, uncertain and unstable. The
practice of inter-in vestment of funds by managing agents constitutes
perhaps tho moat vital defect in this system of finance

Tbe surplus funds of one mill may sometimes bo invested
n the shares and debentures of another mill under the same
iMansging Agency. Funds raised on the credit of one concern
may be lent to another under the same agents. There have been
several cases in recent years where such a practice has beeu followed
in thecotton mill industry. The bBlancesheet* of various cotton
mills both in Bombay and Ahmedabad are dotted with records of
loans and advances to companies in which the same agents are
interested.

The Nagpur, Swadeshi and Ahmedabad Advance Mills purchased
in 1922 tbe debentures issued by the Tata Mills uuder the ramc
Managing Agency (Tata Sons, Ltd.) to the extent of R«. 60,00,000
and out of a total issue of Rs. 1,00,00,000 in 1027 tbe Pazulbhoy,
Pearl, Cresoeot and Indian Bleaching mills all under tbe agency of
Messrs. Currimbhoy Ibrahim & Son*, Ltd., purchased shares of the
premier mills under tho same agents to tho extent of Rs. 13,71,890.

1037] MANAGING AGliMS AS 1NDCSTRIAL FINANCIER 33

The balance "heel of Sir Shapurji Broaiha Mills for the year ending
31et March, 102-1, *bows an advance ©f Ha. 4,33,353-5-1 to llo Ind.
Woollen Mills under (be same agents (Mesas. Matburadas Goknlda*
4 Co.) and that of the Morarji Goculdas Mill* for SOtb Juno, 1925.
show* a loau of He, 1 ,27 ,*210-10-1 1 to the Dharmai Morarji Woollen
Mills tinder the same management. The baiaooe eheet of the Finlay
Mills for 1928 discloses a loan of Ra. 5.50,00»i to Swan Mills under
the same agents and that of the Gold Moll or Mills for 30th September,
1927, shows a loan of Rs. 3 lakhs fiom the Finlay Mills under the same
agency. 1 Instances can easily be multiplied Such a roelbod of
financing is highly questionable There may be no evil consequences
when the financial stand rig of both the mills is very good but the
interests of the shareholders as well as the larger interests of the
industry may be seriously prejudiced when the funds of a concern
of a strong financial position are employed in financing a comparative-
ly weaker one. Reserves of several well-established mills have in
this manner been frittered away by lending them to others nowly
started by the -ame Managing Agents When the new mills fell
under evil days they dragged the oM ones to liquidation along with
them This interlocking of interests often spells rum even for
financially sound concerns which have been tacked on to weaker sister
coucerns. It tends 3 U 0 to perpetuate quite wastefully the life of
even thoroughly insolvent or unsound concerns which in the larger
interests of the industry as a whole should be immediately closed
down. 9 A reference to the proceedings of the Tariff Board of 1927
conducting ibe cotton textile industry enquiry will show several
instances where this practice of mixing up tho funds of different
concerns resulted in heavy losses and m the ultimate ruin of the
better concern* in an attempt to save tlie weaker ones. The employ-
ment of the fnrds of the New Spinning Mill for financing the
Haripur and the Ahmedabad Vepar Cttejak tinder the same manage-
nient, the advances in the cases of the Snraspur, Edward and Srinagar
Mills under the same agents, and those in the case of the Whittle
M ilia (Branch), Asarva and Swadeshi Mill* (Ahmedabad), Scrat
Industrial mills, Viratngram Spinning and Manufacturing Company,

I R.prewnuiion to T.n9 fearl. 1M2, <1 ib« BauiUj 8t»i*IOfcn' Guti.lk*.

' I,U 1 "M.morindum’ «t Fedmtioo ol luJiao Chant*™ .1 Caairaerre nod IcJojir 1 -to «b«
Gowramtro of Ir>1!» rcgxdior Auirt-lmcnU to Ini *0 Compotne* *ct. IV.
ito tod. EccccmUl, January T, |'«. p. 3S0.

5

34

THE CALCUTTA REVIEW

[OCT.

YirlmgnHn Alfred l^ilia Coy. and Kulol Kapadia Mills — all under
one agency — and the consequent heavy loss ami liquidations are
matters of record. 1 The practice is not so rare as was supposed
by the TarilE Board of 1927 and during the last few years of depres-
sion it has tended to grow considerably. 4

The practice is not entirely uukoowu in Calcutta. There are
some Managing Agent* who strictly adhere to the principle of refrain-
ing from lending the funds of ooe company to others under their
control and management. In the Martins, for instance, there is no
such practice. But we have come across some cases of Culcutta
managing agents who have taken to the practice of inter-investing.

The moat notable instances in this connection are those of the
India Jute Co.. Ltd., and the Megoa Mills Co., Ltd., and of tbe
Goureporo Jute Co., Ltd., and tbe Nuddou Jute Mills, Ltd , all
in tbe Group which consists of Mackinnon Mackenzie .V Co',
Barry A Co. and Mcneill A Co. The .summary of capital and hat
of shareholders of the Megoa Mills on olflt December, 1921, show
that out of all 61,208 shares issued NO.OCO were held by Hie India
Jute Co., Ltd.* Tbe Megna was promoted in '920 by ibe managing
agent* of the ludia Jute and the funds of the latter were invested
in its shore capital.' Not only did the India Jute invest in the shares
of the Megna but it hid also been lending to it enormous funds ever
since its establishment. On 30th September, 1922, the borrowings
of the Megna from the India Jute stood at Us. 65,52,0011. At
one time they touched the enormous figure of more than one crote of
rupees. 4 The shares of the Megna have considerably depreciated
in value, they wero being quoted at tbe date of tbe last balance
sheet at Us. 22-8 per share while tbe nominal value was Us. 10. It
gives an idea of the enormous loss suitaincd by tbe promoting company
which held, ilill in 1935, 40,540 ordinary shares in the Megna r-pre-
©euting more lhau 50% of its share capital.*

The Directors’ Report of tfao Gouripore Company, Ltd., a jute
concern under Barry A Co., for the half year ending 31st March 1920
liscloses a proposal for the payment of a bonus on ordinury capital

' lot. TiridBttrd tCottco Textile to trtrv>. 193?. IV (Evidence), p. JIO.

• tteiod of It* In' TwiJ Box'd fC Uon Textile Induai'j), 1S92, p SI.

» Scimnv.ij of Capital *od Li»t <! SbH't!»*3rr> l Tbe Mills. Ltd.. 13 Deo.. 1931.

‘ fW. Biiim Cieetof sba Indi» Jute Co.I/d. *rd Menu Mill.. \M . fioto Sent.,
IS to 8*pt.. 19GS-

S Into M,U« Bov e» ceiwetei up to 3J Bepi. 19!fi Ed. bj H. P. KL.nd.Ii..!

1937] MANAGING AGKN1S AS IN D l* STRIA I FINANCIER

35

at the rate of 400% per annum by fully paid shares in the N added
Mills. Ltd., under the same managing Ogcnev, Rs. 24 lakhs were thus
invented in the Noddea shares. 1 The balance-sheets of the tJonrepore
*hmv further investments in the 7% mortgage debenture loan uf the
Nuddea Mills. The Gourcporc jute i« also found to have invested in
the Gourcporc Electric Supply Company. Ltd., under the same
managing agency. In 1035 it held in the Electric Company 33,50 m
ordinary shares of Ra. 100 each. 4

Another instance is furnished by the Alliance Jutr Mills Co.. Ltd.,
which utilised 15 lakh* of rupee I out of the undivided profits standing
to the credit of its reserve fund in purchasing 150.000 shares of R$. 10.
each in the capital of the Waverly Jute Mills Co. .Ltd., under the
same managing Agents, Beg* Dunlop A: Co 1

Cases of inter-investment of funds in other industries ore also
to he found. There is, however, a difference with the Bombay
practice for in most of their cases the Managing Vgents were uuthonsod
by Special R-mlution« uf Shareb i:dcrs iu general mootings to make
these investments. The actpn>iuon of -hares in sister companies
under the managing agency by Special Resolutions of shareholders in
general meetings is not entirely unknown in Bombay aud A lime da bad
and, as far as it goes, is to be preferred to direct action
on the part of the maasgiog agents without the knowledge and
previous consent of the shareholders. 13y a Resolution of the Company
in General Meeting the Osman Shah; Mills under the agency of
Messrs. Cumrobboy Ibrahim A: Moot purchased 12 lakh* worth of
shares of the Azamjahi Mills under the same agency and the Roipur
Manufacturing Company took share* of the value of 25 lakhs in the
Arvind Mill* in the Managing Agency of which its agent * were
interested. Any way, this is au unsound method of financing and i*
liable to be abused.

Other de/rct* oj the Matwging ige ncy Sytlcw of Finance.

The number of companies under the? control of a managing
agency firm is sometimes *0 large that the strain on its fioaoc al
resource* become* very great. I: becomes impossible on its part to
meet adequately the demands of the several concerns under its

1 Prottcdi**- uf it* OtUintij Iltlf Yr«ri» G*ncni Mwliicof SbarebcJderi held c* S
Jon«. 19*.

* r»f tbi Guiircporo Loj. <Ui««J Sl*i M»nb, 1336

3 Return of Allotment oa :&lh October, 1910, of U* Wuericy Jut* Mill*. Lid.